A new legislative audit released Tuesday warned “time is running short” for Utah policymakers to take action on the state’s growing housing problems, calling on lawmakers to require the creation of a statewide strategic plan.

Legislative auditors concluded Utah needs to build almost 28,000 units of housing a year to keep up with the state’s forecasted growth while signaling a continued prevalence on single-family homes rather than higher-density housing would be a “recipe for trouble as Utah continues to grow.”

Auditors also concluded Utah lawmakers should consider ways to “increase zoning density on a wide scale” and implement more “incentives and penalties for noncompliance” with the state’s housing goals to “ensure local government compliance.”

Auditors floated policy options like tying existing land use requirements to projected population growth (seen in states including Oregon and California) and considering “upzoning,” or requiring local governments to allow more homes to be built on less land. They pointed to policies in Oregon, Minnesota and Pennsylvania as possible examples, as well as an aggressive upzoning law in New Zealand.

Even though Utah cities issued a record number of building permits from 2020 to 2022,  “cities that prefer single-family homes or low-density zoning can use their authority to stifle multifamily or high-density residential projects,” auditors wrote in the report.

The audit came as Utah’s home prices have skyrocketed to unprecedented levels. For years, the state has faced a stubborn housing shortage that is now expected to worsen to a gap of over 37,000 units by 2024, according to housing researchers at the University of Utah’s Kem C. Gardner Policy Institute. Utah’s home prices have been steadily rising for years, but in 2020 they spiked dramatically amid the pandemic housing rush that hit the West particularly hard.

By the end of 2022, low pandemic-era interest rates began to rise rapidly as the Federal Reserve grappled with record inflation — but Utah’s home prices have only tapered slightly, but not enough to bring housing costs down. Still-high home prices and mortgage rates hovering over 7% have combined to make for the least affordable housing market since the 1980s.

Meanwhile, Utah continues to be one of the fastest-growing states in the nation.

“Utah’s significant population growth — combined with slower housing production — has resulted in a shortage of housing units. Without enough housing to satisfy demand, home prices have increased, making it difficult for buyers to find housing at an affordable price,” auditors wrote.

“Because the lack of housing affordability negatively impacts critical areas of public policy, the need to address this issue is a strategic imperative for policymakers at all levels of Utah government.”

Legislative auditors noted their efforts were primarily focused on the middle of the market where first-time buyers are hoping to get into a home.

The Legislative Audit Subcommittee requested the audit to review state and local policies related to “quality, efficient and effective housing” in Utah. The committee was slated to get an overview of the audit’s results during a committee meeting Tuesday afternoon.

‘Time is running short’

Auditors wrote that a “long-term analysis” of city planning data shows “the risk of running out of space for housing, supporting the importance of strategies to deliver more space-efficient housing options.”

They concluded the shortage is the main reason housing is so unaffordable for many Utahns, calling on the Legislature to consider taking action to point leaders at all levels of government toward a common vision for housing.

Models based on Wasatch Front cities’ and counties’ current general plans show Utah could “begin to run out of space” for housing in about 20 years, auditors wrote. They said some of those general plans don’t allow for enough housing to accommodate projected population growth.

For example, a real estate development model by the Wasatch Front Regional Council showed that if local governments and Salt Lake and Davis counties don’t provide for more housing in their general plans, they could begin to run out of space for housing before 2050.

“Much of the housing capacity in current general plans comes from low-density, single-family detached homes expanding into undeveloped areas,” the audit states. “This threatens open space and agricultural land and can create new infrastructure and transportation challenges.”

Auditors added that it’s “encouraging that many local governments already seem to recognize the need to increase housing density in strategic ways,” pointing to Wasatch Front Regional Council cities that have already stated intent to develop higher-density city and town centers.

That intent, “while not yet fully implemented in local land use policies, is a clear sign that conversations are already taking place to meet the challenge of population growth by building more housing units on less land,” auditors wrote.

From 2020 to 2040 alone, Utah is expected to grow by more than 550,000 households, according to state demographers at the Kem C. Policy Institute. “Ideally,” auditors wrote, “each household would have a place to live.”

That will require setting a pace for housing construction that not only addresses the current shortage but also plans for the future, auditors wrote. By analyzing both historic building permit data and household population forecasts, auditors concluded Utah needs to build 27,900 housing units per year to keep up with the state’s growth.

Even though government doesn’t build housing, “setting the right mix of public policy could create more favorable conditions to create housing at the level needed to keep pace with population growth.”

“To be clear, attempting to build out of a housing shortage is a difficult task, and there are very few success stories to draw lessons from,” they warned. “Nevertheless, because the supply shortage is the root of the problem, increasing the supply of housing is an essential strategy. … We believe policymakers at both the state and local level can take significant steps to create a better environment for housing development.”

What should Utah lawmakers do?

While crediting lawmakers for passing several bills in recent years to address different aspects of Utah’s housing problems, auditors suggested the lawmakers consider a range of other policy options to increase zoning density across the state and help pave the way for more higher-density housing.

“Pressure from citizens, along with other factors, has led local legislative bodies to favor single-family homes on relatively large lots,” they wrote. “Most of the land in Utah’s largest cities is currently designated for single-family detached homes, which means certain areas could begin to run out of space for housing before 2050.”

Auditors recommended the Legislature consider tying existing land use requirements to projected population growth, perhaps like what other states including Oregon and California have done.

“In those states, population growth targets are used to gauge whether certain planning and zoning decisions will reasonably accommodate projected population growth,” auditors wrote. “For example, local governments in California are required to submit plans detailing the specific locations where they will rezone land to accommodate a specific growth number forecasted by the state. If locations fail to plan or zone for their portion of the growth forecast, penalties are prescribed, such as withholding of certain state funding or the limited loss of specific land use authority.”

Auditors wrote lawmakers “may want to consider similar options to benchmark moderate-income housing plans to Utah’s official projections for household growth. Doing so could allow local governments the flexibility to accommodate their portion of Utah’s population growth as they see fit.”

Additionally, auditors recommended the Legislature also consider “upzoning,” or requiring local governments to allow more homes to be built on less land to increase zoning density on a wide scale. They pointed to the following places as examples:

• Oregon, which upzoned medium- and large-sized cities, requires medium cities to allow duplexes in residential zones and large cities to allow for duplexes, triplexes, fourplexes, cottage clusters and townhomes.
• Minneapolis, which passed an ordinance that allowed duplexes and triplexes in lower-density districts previously zoned only for single-family or two-family dwellings. Auditors noted a county judge ordered a halt on upzoning in Minneapolis due to environmental concerns, but “this ruling has not prevented upzoning forever; rather it requires the city to prove no significant environmental impacts before moving forward.”
• Pennsylvania, which requires all jurisdictions to zone for different types of housing, including multifamily. “This ‘fair share’ policy aims at building affordable units through market mechanisms,” auditors wrote. “If a jurisdiction does not provide its fair share, developers can sue municipalities to ‘overcome exclusive zoning.’”
• Auckland, New Zealand, which made an “aggressive effort to upzone and consolidate land use authority,” auditors wrote. The upzoning resulted in almost 27,000 more units, much of which were attached multifamily units.

Auditors pointed to Utah’s newly passed first-time homebuyer assistance program, which caps qualifying properties at $450,000 in order to encourage homebuilders to build more affordable homes.

They noted the program’s administrator, Utah Housing Corporation, has said many of the applicants have bought townhomes or condos because those are the type of units that first-time buyers can afford in today’s market. That suggests “upzoning can clear the way for housing units that are more affordable simply because they are smaller and use less land,” auditors wrote. “This approach would create a uniform growth mandate across all selected jurisdictions.”

Are cities doing their part?

In response to some concern about whether cities are complying with state regulations thus far, auditors wrote those concerns are “largely unfounded,” but added questions about whether certain cities have imposed “unreasonable development standards” or have reviewed building permits in a timely manner “warrant examination.”

“Although we were unable to substantiate accusations that cities had placed unfair roadblocks in the path of development, this finding does not necessarily mean that all cities are acting appropriately in terms of requirements and timeliness,” auditors wrote. “Some cities may use some of these tactics to slow down development; however, after reviewing all complaints that were specific enough to allow follow-up, we were unable to find evidence of cities acting in bad faith regarding requirements and timeliness.”

However, auditors did conclude that cities differ in their attitudes and approaches when it comes to housing, and “some cities have used their broad land use authority to circumvent new laws.”

As an example, auditors pointed to Springdale, which passed a new ordinance shortly after HB1003 took effect, which prohibited certain design requirements for single-family and twin homes. Springdale’s ordinance reduced the maximum allowable size and height for certain residential units, meaning property owners can now build larger, taller homes only if they “voluntarily” comply with the design standards that were outlawed by HB1003, auditors wrote.

Auditors also pointed to Lehi, which passed a new temporary ordinance to prohibit internal accessory dwelling units (or mother-in-law apartments) in its planned community zones soon after the Legislature passed HB82 in 2021 and SB174 in 2023 to allow internal accessory dwelling units to be allowed in any primarily residential area. Lehi cited concerns about infrastructure and capacity when it passed that temporary ordinance.

“We believe that such a sweeping ordinance, albeit temporary, should have been founded on better analysis, and we question a political subdivision’s approach to counteract the state Legislature’s intent in this way,” auditors wrote.

Utah lawmakers should consider the “broad powers” highlighted in those examples and “be prepared to limit pertinent powers and institute penalties when there is evidence of circumvention,” auditors wrote, adding that this “cat-and-mouse pattern of policymaking” has occurred before in states like California, where “many updates have been made to correct issues or loopholes.”

Auditors also listed the cities that have issued the highest number of residential building permits from 2018 to 2022. Salt Lake City topped the list with a total of 13,863 units followed by Lehi with 8,558; St. George with 7,828; South Jordan with 6,128, and Herriman with 6,106.

The ski town of Alta and the Utah County town of Woodland Hills both built the lowest number of homes from 2018 to 2022, with zero building permits issued in that time frame. Goshen issued only 12 permits, Uintah 18 and unincorporated Davis County 20.

The audit also showed single-family homes have dominated new residential construction since 1995, though other building types surged starting in 2018, according to the Kem C. Gardner Policy Institute and the Ivory-Boyer Construction database.

Response from cities

In a written response to the audit, the Utah League of Cities and Towns called a statewide strategic plan a “worthwhile” pursuit, primarily to provide “more affordable homeownership opportunities for Utahns.”

However, the league also cautioned that any “targets” included in the strategic plan should “recognize what government controls and what government does not control. Cities plan for housing, but the private sector builds housing.” It noted one of the largest impediments” of housing are infrastructure, including water, sewer and roads, calling for state investment in those areas.

The League also expressed hesitancy about the recommendation to expand moderate-income housing plan requirements to include household growth forecasts, noting “other states that have set benchmarks do not yet have results of whether those policies have improved housing affordability.”

It also worried about benchmarks that are “outside of government control,” noting that some cities have zoned for unlimited density near transit areas but the market has only produced wood-framed, podium-style apartment buildings due to cost, and those styles are more profitable and easier to finance than building larger steel-framed buildings. It also noted some cities have zoned for increased density, but homebuilders only built to a fraction of the entitled density.

As for the recommendation that the Legislature consider increasing zoning on a wide scale — such as upzoning — the league expressed concerns about the “potential one-size-misfits-all state action that mandates certain outcomes without consideration of infrastructure, geography, geology or planning.”

“Density does not always equate to more affordability or more affordable home ownership,” the league wrote. “For example, cities have reported examples to the league of where they have zoned for smaller lots, but the market has produced large housing units on those small lots that are not affordable.”

The league also balked at the Legislature considering more incentives and penalties, saying Utah already has legislation in that space, including some laws that have yet to go into effect.

“Last year, 97.5% of cities were in compliance with (legislation that requires local governments to plan for moderate-income housing),” the league wrote. “Even so, the league has been frustrated with annual changes to the (moderate-income housing plan) statute and processes, which complicates the ability of local governments to know exactly how to comply.”

Based on data it collected from 66 cities across Utah, the league said more than 190,000 entitled units for building permits have not yet been requested.

“This data demonstrates to us that local governments are planning and zoning for housing units,” the league wrote, “even when there may be public pushback.”